The Canadian dollar weakened yesterday and is trading flat this morning. The performance of the currency has been particularly disappointing relative to the US dollar. Despite broad USD weakness, USD/CAD continues to trade sideways. As crude oil weakens from elevated levels, one of the main catalysts that has strengthened the Canadian dollar in recent days is now acting against it. In our broader take on the loonie, we explained that most drivers behind the Canadian dollar are negative today. With slowing growth, neutral monetary policy, crude oil weakness and ongoing NAFTA negotiations, there are few bullish catalysts that can help strengthen the currency.
The USD/CAD exchange rate is currently above 1.2710. The euro is up sharply against the Canadian dollar. EUR/CAD is currently above 1.50. Lastly, the pound is also up against the Canadian dollar, with GBP/CAD trading above 1.660.
This is a fairly light week for Canadian economic releases. On Friday, we’ll see CPI and Core CPI numbers. Last week, housing starts and new build permits beat expectations while the Bank of Canada remained “cautious” in its outlook for future rate hikes.
As the Canadian dollar rebounds thanks to strengthening crude oil prices, we are now neutral on the currency in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.